Executive Briefings

Is There Growing Threat to Free Trade?

By: Wharton School of Business 03.11.2009

The $787bn stimulus plan that U.S. President Barack Obama signed Feb. 17 contained a provision that was hardly unexpected but nevertheless worrisome to proponents of global free trade. It was a requirement that projects funded by the bill buy American-made goods whenever possible. When governments around the world spend vast sums to stimulate their economies, it seems only reasonable for each to invest at home.Economists and political leaders in the U.S., Europe and elsewhere worry that this simple logic is spurring protectionist sentiment around the world, threatening free-trade principles that are crucial to any global economic recovery. This comes on top of concerns about the decline in trade from shrinking consumer demand and credit problems caused by the financial crisis.For the moment, protectionism is less a reality than a threat--but it is a growing threat to be taken seriously.Source: Wharton School of Business

The $787bn stimulus plan that U.S. President Barack Obama signed Feb. 17 contained a provision that was hardly unexpected but nevertheless worrisome to proponents of global free trade. It was a requirement that projects funded by the bill buy American-made goods whenever possible. When governments around the world spend vast sums to stimulate their economies, it seems only reasonable for each to invest at home.Economists and political leaders in the U.S., Europe and elsewhere worry that this simple logic is spurring protectionist sentiment around the world, threatening free-trade principles that are crucial to any global economic recovery. This comes on top of concerns about the decline in trade from shrinking consumer demand and credit problems caused by the financial crisis.For the moment, protectionism is less a reality than a threat--but it is a growing threat to be taken seriously.Source: Wharton School of Business